European Union (EU) Ambassador to Guyana Geert Heikens says a regular and in-depth analysis of the sugar industry is needed as a necessary step forward, and he has also referred to reports in the local press about the state of the sector as disquieting.
Responding to questions on the industry posed by Stabroek News, Heikens said it is important for such an analysis to be done, in addition to comparisons being made with other sugar producing countries. This, he said, can be to update the “Blue-Print for success and which sets realistic targets, initiatives and actions.”
GuySuCo recently announced that it was experiencing temporary cash flow problems and in addition the industry has suffered from industrial action. GuySuCo reported a $3 billion loss from 2008 and had projected cash deficits going forward. The corporation also indicated earlier this year that the projected cash deficit at the end of 2009 is expected to be $523M.
Measures in its turnaround plan all target cost-cutting projects coupled with injecting capital. The plan is banking on the sale of lands at Diamond with a potential net gain of $34B, in addition to the disposal of several other assets to improve the financial position of the industry, which is also plagued by declining levels of sugar production. The turnaround plan suggests that the future viability of the struggling industry is dependent on accelerated mechanisation, and it envisages transforming the Enmore estate into an important hub, ending grinding at LBI, an ethanol plant and transferring health and community services to the state.
Heikens underscored the importance of sugar to the local economy calling it a “pillar” while noting that the EU Delegation understands that continuous efforts to make the sector competitive and viable are essential. He said also that the European Union’s funded Multi-annual Sugar Programme, which supports the government’s efforts to improve the competitiveness and viability of the local sugar industry, continues in 2010.
He stated that the programme has a total envelope of Euro 670 million for 18 ACP sugar producing countries, of which Euro 90 million (Guy $ 27 billion, US$ 130 million) has been allocated to Guyana. The decisions for the 90 million are spread over 5 years, he noted, with various disbursements annually. The tranches are 2006 – 6 million; 2007 – 27 million; 2008 – 24 million; 2009 – 18 million; 2010 – 14 million. He said too that disbursement for each year happens in the following year.
Heikens explained there is always a fixed tranche to be assessed by general economic and public finance management criteria and a variable tranche linked to a series of performance criteria taken from the sugar. He disclosed that in 2010, as in the previous years, the Delegation working with government will prepare the Annual Action Plan 2010 which sets the disbursement criteria of the 14 million € (4.2 billion G $) 2010 envelope to be disbursed in 2011.
Since Government failed to meet two performance indicators for the Annual Action Plan 2007, Euro 6 million of the variable tranche could not be disbursed. However, Heikens said an amount of Euro 19.818.750 (Guy$ 5.94 Billion), 2007 fixed and variable tranche, was paid from the total available envelope for that year. “The overall disbursement of variable tranches of EU budget support programmes (sector like e.g. sugar and general) in the world is on average 70 %.” he added. “The fixed tranche for the year 2008 [Euro 12 million – Guy$3.6 billion] is on its way to the coffers of the Bank of Guyana and a decision about the variable tranche for that year is about to be taken,” Heikens said further.
After the European Union decided that it would cut the price of sugar exported to EU member countries from African Caribbean Pacific sugar producing countries by 36%, it was indicated that support would be offered to reform the sugar sector which were affected, the price cuts took effect from July 2006.
The EU support will assist the government in its aims to reform the sugar sector by upgrading GuySuCo’s sugar factories, establishing a sugar packaging plant at Enmore, increasing total sugar production and mechanising GuySuCo’s field operations, to improve profitability.